Where Tech Workers Should Live, Where Inequality is Decreasing and Where the Flying Taxis are

We have a rich history dealing with customer service representatives, so much so that we even made a movie with our friend, Mike Williams, about them called Please Hold. But today’s customer service representatives appear to be influenced by the current political landscape, asserting up is down and black is white, literally. We offer an illustration. The INTN better half recently gave her parents the gift of a DNA test so they could learn more about their genealogy. Our father-in-law is African-American and our mother-in-law is white. But the results they received from the company asserted that our father-in-law’s background is western and northern European. So our mother-in-law called the company and said there must be some sort of mistake. Ahh, but the customer service representative asserted their test was completely accurate and offered a meandering and strange history of whites bringing blacks to America and the mixing of the two. Our mother-in-law patiently explained that the test results asserted her husband had less than 1 percent African heritage in him despite the fact both his parents are African-American. The customer service representative, not unlike a White House spokesperson, stood her ground saying the test results are always correct, telling our mother-in-law that her husband must indeed be white. Our mother-in-law, whose husband was standing next to her, and who knows empirical evidence when she sees it, said, “If you look at the person I’m looking at now, you wouldn’t say that.” But today’s customer service representative creates her own facts and refused to admit there was something wrong with the test results. So as we adjust to our new world where black is white and white is black, we dive into where tech workers should live, examine where inequality is declining and tell you which country is the latest to test flying taxis. It’s this week’s International Need to Know, giving the Japanese-American perspective on our upside down world.

Without further ado, here’s what you need to know.

Where to Live as a Tech Worker

Tech workers can write their own ticket we are often told. Computer programmers and others of their ilk are in such great demand by technology companies that these workers can choose where they want to live. So where are the best places for such workers to lay their weary heads after a hard days night’s coding? The global real estate firm, Savills, gives us to two criteria to look at: commute time and rent costs. Among the tech cities Savills examined, tech workers in Austin had the shortest commute time. But in recent years the South by Southwest city has seen rents go north and is the sixth-most expensive city for rent among those examined by Savills. The cheapest tech city for rent is Seoul; followed by Santiago, Chile; and Berlin. We note that our city, Seattle, is both expensive and has lousy commutes. Of course, the same is true of other top tech cities in the world such as San Francisco and Boston. Will these disadvantages eventually affect these urban region’s prowess for being tech leaders or are there other factors that will continue to driver their success? We guess, at least for the mid-term, the latter. We note that Chinese cities are not even examined. in the study. We plan on soon updating you on China’s technological and innovation prowess, which continues to be underrated.

A Region Becoming Less Equal

Inequality has become a big topic nowadays, with evidence of growing inequality in the United States, Europe and other parts of the world. But over the last decade, one region has seen inequality decrease: Latin America. Most countries in Latin America, according to a new study, saw their Gini Coefficients (a measure of inequality–but also a great name for a character in a science fiction story) decrease from 2002 to 2012. Only in Honduras did inequality go up during that period. You might think because a number of these countries elected socialist governments during that period, that government transfers are the main reason for the decline in Gini coefficients. But that same study found that government transfers only account for a quarter of the decline. Other factors, including growing economies coupled with rising education levels, are the main factors for the decrease in inequality in Latin America. Of course, in Venezuela everything is now equal—equally catastrophic. Better to grow your economy and increase your education levels than to implement disastrous economic policies.

 

Singapore Flying Taxis

It is true that we have been waiting for an opportunity to write a headline about flying taxis, especially in Singapore, but this is also news well worth sharing. As long time INTN readers know, we have a soft spot for innovative transportation solutions. In fact, last month we reported from an Autonomous Vehicle conference that we attended in Santa Clara. And we recently reported on a flying taxi initiative in Dubai. So we read with interest about Singapore’s efforts in this technology. In fact, one of the prototypes the Singapore government is examining is the same Ehang 184 autonomous aerial vehicle that Dubai is planning to start testing this summer.  Singapore is taking a more cautious approach than Dubai. Pang Kin Keong, the Permanent Secretary for the Ministry of Transport recently told an audience that “In 2030, you bet your money that aerial transport will also be a means of urban mobility.” 2030 is not this summer but it is also not that long from now. Singapore is already working with Delphi Automotive to test and soon launch a fleet of self-driving taxis (the ground variety) and is investing in a variety of other innovative transportation options. We expect places such as Singapore, with an advanced economy, and a proactive assertive government, will lead the way in the initial use of new transport technology, ahead of Europe and the United States with their more stodgy bureaucracies. And we expect flying taxis to be far safer than taxi drivers in New York, where we have often nearly lost our life due to crazy cabbies.

Canada First, Hello China from India and Where the Forests Are

In recent months, thanks to a client providing us a bus pass, we have been taking the bus more frequently into downtown Seattle. Specifically we have been riding the notorious E Rapid Ride which travels down Aurora Avenue and whose ridership is not, shall we say, the type of people who are members of the Bellevue Club (where we had a meeting yesterday–more on that, perhaps, in the future). In fact, we are fairly certain on one mid-day ride a few weeks ago that we were the only rider not on meth. On various rides, we have had to roust the passenger next to us who was passed out, broker a fight between a homeless woman and the bus driver and walk by a passenger brandishing a sword. At first we were a bit snobbish about all of these rumblings on the bus but now we accept them and welcome them (as long as the sword is not brandished on us or anyone else). We realize these rides are one of our few exposures to people outside of our socio-economic class. A book we are reading, which we highly recommend, The Complacent Class, talks about how the U.S. is more segregated than ever: economically, educationally, socially and racially. We do not agree with everything in the book but its assertions and data are thought provoking. Even as we continue reading the book, we are not complacent about immigration in Canada, or about how China and India measure up on the Internet or even upon discovering some surprising data about forests. It’s this week’s International Need to Know, integrating data, analysis and information as best we can.

Canada First

We have witnessed revolts against immigrants in parts of Europe and have seen it up close here in America as well. Now Canada, the apparently mild mannered country to the north (having been to hockey games I’ve never understood that stereotype), might be joining the raucous fray. A new poll shows a “plurality of Canadians disapprove of the way the Trudeau government is handling the recent illegal border crossings.” 48 percent of those surveyed say those migrants crossing illegally from the United States into Canada should be sent back. One might think these Canadians are merely worried of American blue state refugees wandering into their country with glasses of roséand quinoa kale wraps* (and who wouldn’t be?), but the survey question clearly refers to people “from the Middle East and Africa” as you see in the graphic below. In addition, 46% of respondents disapprove of the way the Trudeau government is handling the refugee issue. In refugee matters, Canada is not an outlier but following other countries attitudes. As we have written before, we live in a new age of fear, and like all such ages, the risks of giving in to such an emotion are ripe for trouble and danger. .

 
  

*Full disclosure: in the last two weeks we too have sipped rosé and munched quinoa (but not in a wrap!)

Hello India? This is China

Twenty years ago there was a debate about who would develop faster, China or India. China won that argument as easily as Gonzaga will defeat West Virginia later today. China, until recently, averaged higher GDP growth and built up much better infrastructure. It is also way ahead in the digital economy. As you see in the graph below, far more Chinese use the Internet than those in India—71% to 21%.  Not coincidentally, Chinese are also far more likely than Indians to own a smart phone—68% to 18%. As the Pew Research Center reports, this digital advantage is due to China building a larger middle class with more wealth, “Between 2001 and 2011, the share of middle-income Chinese, those making $10.01-$20 a day, jumped from 3% to 18%. In India over the same decade, the middle class share of the population grew from 1% to 3%.” Of course, today China’s economy is growing more slowly (probably slower than official China government reported figures of 6.7%) and India’s economy is growing faster, around 7%. And since all those Chinese on their smart phones will be distracted playing video games and hanging out on WeChat, India’s economy, and digital sphere, may catch up more quickly than we think.

 

Seeing the forests through trees of new data

We have all read stories about the loss of forests, including the catastrophic loss of rain forests, but did you know in some countries there has been a gain of forest land in recent years? China, Russia* and India all have more forest land today than twenty-years ago, according to the World Bank. There have been huge losses in South America, especially in Brazil which since 1990 has lost 531,000 square kilometers since 1990. Large parts of Africa have also lost forest land. But many countries, especially developed ones, are gaining forest land. In fact, this data provides evidence for a pet (buffalo, as you will see) theory of ours that as more and more people huddle in mega cities, country sides will return to the way they were 200 years ago since no one, or at least few people, will be living in those areas. This will happen in many large countries, including in large swathes here in the U.S. In the future, we may again be singing about where the buffalo roam.   

Spanish Recovery, Crediting the Chinese and Where Women Dominate the Internet

Regular readers of International Need to Know are aware we are unafraid of controversy, willing to tackle the big issues, able to buck convention when convention needs a good buck. So we report to you that last week while in the Valley of the Sun we tried, for the second time, an In-N-Out Burger, fries and milkshake. When we first tasted the famous Los Angeles based chain’s burger a number of years ago we posted on our Facebook page that we far preferred Five Guy’s burgers and fries. This was before our new political age of rage, back when Facebook was a platform for earnest debate on such matters (as well as for kitten videos and photos of food–it was a more innocent, joyous time). Our post caused much consternation, counter-attack and disbelief. But we stuck to our guns. However, we also believe in second chances and so eagerly ordered our food at In-N-Out last week. After this rigorous, fully scientific study we are eager to report that we stand by our original assertion no matter how many INTN readers it may cost us: In-N-Out is not worthy to carry Five Guy’s lettuce. But even as we dip another Cajun fry in ketchup, we serve you Spanish success, Chinese worries and information on where women rule the Internet. It’s this week’s International Need to Know, the fast food of international information only more nutritious.

Without further ado, here’s what you need to know.

Spanish Recovery

A number of years ago we had our cell phone pick-pocketed while on the subway in Barcelona. We chalked it up to the struggling Spanish economy and our careless ways. But amidst continued Brexit worries (more on that soon), Dutch election uncertainty and our continued angst over Italy, today we find European rays of light in Spain. The country’s economy was one of the hardest hit in the EU crisis, but last year its economy grew 3.2%, the third straight year of relatively robust growth.The Spanish economy continues to grow at the same rate this year. Deleveraging has occurred in Spain with household debt decreasing from over 120% of GDP to 97% of GDP over the last six years. Non-performing bank loans have fallen sharply too. There are, of course, still great challenges. Unemployment has fallen from 27% but it’s still high at 18%. And youth unemployment, although it’s fallen too, is still crazy high at just over 40% causing a lost generation of Spaniards. Also worrisome is that productivity is not only not growing but has decreased as you see in the chart below. Nonetheless, Spain, unlike Italy and Greece, has shown signs of life. That is a good and needed boost for the EU.

 
      

Crediting the Chinese Economy

If you want to look for positive signs in the Chinese economy, you can do so. If you want to look for negative ones, they’re easy to find too. China, as always, is complicated. Given that the rain pounds our window as we write, today we look for stormy weather in China and find it like Lena Horne humming a lyric. One worrisome barometer is that credit continues to grow at a faster pace than the economy. According to the chart below provided by the French financial firmNatixis, aggregate financing is growing 12.8% year over year. China is trying to transition from an export/infrastructure investment economy towards a more domestic consumer driven one. But, as you see in the second chart below, retail sales growth, although still increasing at a pretty good rate, has been steadily trending downwards since 2011.These two trends don’t seem sustainable. Of course, this is not to say China is about to crash, but it bears (wait, is that a pun?) watching.

  

Where Women Use the Internet More

We are not surprised but we were also unaware that in general men use the Internet more than women. Ten jokes immediately come to mind regarding men dominating Internet usage, none of which are suitable for a high-brow, sophisticated venue such as INTN. But, courtesy of the World Bank, we learn of 13 countries where women are on the web more than men. Almost all of the top five are fairly predictable coming from Northern progressive countries, including Finland, Denmark, Sweden and the Netherlands. But we never would have predicted that Bahrain would take the top spot. The full list of countries where women use the Internet more than men is below.

 

   

An Argument Worth Having, Economic Winning Streaks and the Best Passports

We are on the road again this week, this time coming to you from the greater Phoenix area where we are keeping a close eye on our beloved Seattle Mariners. When we booked the trip many months ago, we forgot about the World Baseball Classic which started this week. In this tournament, countries play against each other with the winner earning a true world championship. This means some of the Mariners’ best players are off playing for their home countries–Venezuela, Dominican Republic, Canada–and not here for our viewing pleasure. One would think that someone writing something called “International Need to Know” would have kept up to speed on such a world event. But even as we bow our head in shame, take a sip from our beer, watch bright young prospects play in the sun and prepare to bite into a hot sausage sandwich, we bring you an argument worth having, inform you about the country that has the longest economic winning streak and issue information on which country’s passport you would be lucky to have. It’s this week’s International Need to Know, aiming to be at least a .300 hitter in the game of international affairs.

Without further ado, here’s what you need to know.

An Argument Worth Having

People fight about just about anything nowadays, often on social media platforms and even more often vociferously and angrily. So we were gratified to recently come across an argument worth having. Early last year, three economists–David Autor, David Dorn and Gordon Hanson– published a paper asserting China did indeed take away large swathes of jobs from the U.S. from 1990 to 2007. The paper, which was full of data, complicated equations and analysis, forced a re-thinking on trade issues by at least some. However, last week, George Washington University economist Jonathan Rothwell published a paper taking issue with Autor, Dorn and Hanson’s data. He asserts that the loss of jobs to China is not as significant as the original paper claimed. The three authors of the original paper have now shot back at Rothwell, stating, “The main methodological critique provided by Rothwell is unfounded. The critique provided does not follow from his own logic.” We do not have the chops to determine which side is right, but will note that the original paper, as we understand it, claims the negative trade effects were localized. That is, loss of jobs to China might have been very harmful to certain local communities, but the paper does not assert an overall loss of American jobs. In fact, as Kevin Drum recently illustrated, American, German and other countries’ manufacturing job losses have been remarkably steady over the last 50 years (see the chart below). Plus, China is now also losing manufacturing jobs–the U.S. is no longer siphoning jobs on net to China if it ever was (depending on which economist you believe). The economists’ argument regarding how many job were lost to China is definitely worth having but the squabble falls into the category of fighting the last war.

Connecticut Women’s Basketball Team of Countries

The Connecticut women’s basketball team has won more than 100 straight games as it heads into the NCAA tournament. That’s darn impressive for any team not playing the Washington Generals. Australia’s economy has an impressive streak of its own going, having gone more than 25 years without a recession. That’s the current longest streak without a recession in the world. Poland comes in second with 86 consecutive quarters without a recession followed by South Korea (proving I guess that you don’t need an active president to have a successful economy and that a dangerous neighbor next door armed with nuclear weapons can’t stop you either). The mighty Slovak Republic is fourth. These are four fairly disparate economies so there’s probably no big lesson to learn from them as a group. But it should be noted that of the longest economic win streaks since 1970, these four current streaks all rank in the top ten. That so many of the hot streaks are taking place today may, or may not, say something significant about our current world economy. Is the economy better, more resilient, propping itself up artificially or is it just statistical noise? Let’s get Autor, Dorn, Hanson and Rothwell fighting about this.

Passport to Freedom

At the airport last week while standing in the TSA pre-check line, which was longer than usual, passengers pulled out their passports and other IDs. I saw identification papers from many countries which leads to the question: which countries’ passport is the best to have? Nomad Capitalist, a consulting firm that helps people move around the world and pay reduced taxes, offers their Nomad Index which provides one perspective of which is the best passport. Its rankings are based on which countries allow the most visa-free travel, are most lax about collecting taxes overseas, have the best perception, provide the ability to have dual citizenship and provide the most overall freedom. Under those criteria, Sweden tops the index mainly because someone with a Swedish passport can travel to 176 countries without having to get a visa. It is also easier for a Swede living overseas to avoid paying Swedish taxes. As you can see in the table below, all of the countries in the top ten are in Europe. For those of you curious, the U.S. ranks only 35th in this index due to the taxes, perception and freedom categories. Afghanistan comes in last.

 

    

Uncertainty, Investing for the Long Term and Manufacturing Costs

This week INTN is on the road in lovely Santa Clara, California where we are attending the Autonomous Vehicles Conference. It was a little awkward talking with the Lyft driver on the way to the conference hall telling him we were attending an event that aims to put him out of a job. In fact, a Lyft executive was on one of the panel discussions we attended and we thought about bringing the driver in to ask a question. Just a few years ago such a conference would have been regarded as one focusing on speculative technology and indeed there are still challenges to achieving fully autonomous vehicles–one company told of an Australian partner who informed them the car would need to be able to distinguish between a cow and a kangaroo (they hopped right to the task). But all the companies we talked with agreed that the two main challenges are not building autonomous vehicles that can truly drive on their own, but instead the triple threats of regulatory issues, cultural barriers and hackers. In fact, the existence of the conference itself is testament to the arrival of autonomous vehicles–it is your basic trade show, with networking, trade booths, and rubber chicken for lunch. We might as well be at a vacuum cleaner convention. But even as we prepare to shift into our autonomous vehicle future, we still bring you the results of a global uncertaintly index, information on where to invest for the long term and the big changes in manufacturing costs around the world. It’s this week’s International Need to Know, discarding envelopes from Warren Beatty even as we open up the world to your inquisitive eyes.

Without further ado, here’s what you need to know.

May You Live in Uncertain Times

Last week we presented an economic uncertainty index for China developed by three business professors. It should be taken with a grain of South China sea salt since it was based on tracking the frequency of articles about policy related economic uncertainty from only one newspaper, the South China Morning Post. But the three profs also track global economic uncertainty and for that they have a more rigorous method: they track articles on economic uncertainty from a variety of newspapers, as well as changes in tax codes and Fed predictions. As you see in their graph below, the global economic uncertainty index is at its highest level since 1997, when they began tracking the data. The previous peak of global uncertainty took place right after the Brexit vote. It’s surprising that both today’s uncertain times and Brexit led to a higher score in the index than the fall of Lehman Brothers and the global financial crisis. Does this say something about what is happening today or about newspapers and the Fed? We are uncertain (darn, will that increase the index even more?).  

 
  

Investing for the Long Term

We are told to invest for the long term. So which country’s stock market has performed the best over the last 117 years? Credit Suisse provides the answer in their 2017 Global Investment Returns Yearbook. There they document the returns of stock markets all over the world dating back to 1900. Surprisingly the country with the highest rate of return over that 117 year period is South Africa, followed by Australia. The U.S. comes in third with a real annualized rate of return of 6.4% (which we note worriedly is below what many pensions plan for). For stock market returns, it’s good to be a resource rich country such as South Africa and Australia. In fact, Credit Suisse notes, “A common factor among the best-performing equity markets over the last 117 years is that they tended to be resource-rich and/or New World countries.” Of course, stock markets are not economies. South Africa has had a great stock market for the long run but it’s economy is problematic. One last historical point of interest: note in the pie charts below which stock markets dominate today as opposed to 1899. A century’s time leads to lots of changes. What will China’s and India’s stock market’s relative sizes be 117 years from now (assuming there are still stock markets in the AI dominated future)?


    

The Cost of Manufacturing

For all the current concerns about China’s economy, its success over the last 20 years, especially compared to other economies, is remarkable. Take the increase in wages, for example. Manufacturing wages have increased since 2005 from $1.20 per hour to $3.60 per hour. That means Chinese manufacturing wages are above the rates of Mexico, Thailand and Brazil, to name just a few. That’s one of a number of reasons China is attempting to transform from a mainly manufacturing exporting economy towards one more reliant on services and domestic demand.